Every industry is guilty of perpetuating some kind of marketing gimmick, but it's in a cloud provider's best interest to ensure that its service-level agreement (SLA) isn't one of them.
Offering aggressive cloud computing SLAs to customers is certainly a way to gain trust and secure an edge over competitors, but providers have to be willing and able to pay up if they fail to meet the terms of an SLA; otherwise, the entire operation could become unprofitable. SLAs have the potential to spark adoption and keep customers happy, but if mishandled, they can result in dire consequences.
The process of putting together an SLA that makes sense for both providers and their customers requires both parties to scrutinize their strengths and weaknesses and be aware of the reliability (or lack thereof) of the provider's system architecture. If a cloud provider can't afford to invest a significant amount of money in architecture, then it's likely it can't afford to offer an SLA with aggressive terms -- and it certainly can't afford the payouts when guarantees aren't met.
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"Cloud SLAs are not just pieces of paper. If you're going to make a guarantee of any sort in a contract, then you're going to have to be prepared to do something," said Tom Nolle, president of Voorhees, N.J.-based consultancy CIMI Corp. "You also have to be aware that every dime you add to your infrastructure, network, servers, resources, data center network, storage software and operations sucks a buck out of your bottom line. At some point in time, the services become unprofitable for you to offer."
The first step in being able to prevent SLA violations --without going broke -- is for providers to conduct thorough and realistic examinations of their technical capabilities, as well as their budgets. Once those are established, any SLA terms should be based on what providers can truly guarantee, not what they think customers want to hear.
"Our expression is 'put your money where your mouth is,'" said Chris Drumgoole, vice president of global operations at Terremark, a Miami-based cloud provider and wholly owned subsidiary under Verizon. "You really can't have the SLA be a marketing ploy. It needs to be legit."
Understanding your limits and strengths
If cloud providers are confident in their ability to outperform uptime guarantees offered in an SLA, this can reduce the frequency of heavy payouts . However, providers won't be able to get away with offering SLA guarantees that can only be narrowly upheld, according to Drumgoole. To significantly reduce the amount of risk providers expose themselves to, they must be certain they can surpass those guarantees.
You really can't have the SLA be a marketing ploy. It needs to be legit.
Chris Drumgoole, Terremark
"We typically know we are able to exceed [the guarantees made in our SLAs], so [our customers are] typically getting an uptime number better than their SLA," Drumgoole said.
Enforcing guarantees around availability, reliability or performance typically requires cloud providers to invest more in their architectures. If claims in these areas are merely superficial or not backed by the necessary resources, providers could ultimately spend more on compensating customers when services go down than they would have spent bulking up infrastructure to ensure cloud SLA payouts will be few and far between.
There are many different factors that should come into play when providers assess their capabilities, including experience level, whether they build and manage their own data centers, and how much control they have over customer applications.
"We spend a lot of time building our data centers for resiliency, and we have a network operations center where we have people monitoring [our services] 24/7, which is why we are able to confidently make strong guarantees in our SLAs," said Gerardo Dada, a product marketing leader at Rackspace, a hosting and cloud provider based in San Antonio.
Meanwhile, application monitoring and management services could give cloud providers more insight into and control over customers' environments. These types of advanced features can help providers ensure that services will be well-managed and experience less downtime, ultimately making aggressive cloud computing SLAs a realistic goal.
"We can help customers architect, build, monitor and patch their applications, and we even proactively check the status of critical applications," Dada said. "Being able to actually manage applications for a customer is a critical step in being able to offer an SLA that the application will actually work."
Cloud computing SLAs should be mutually beneficial
Another important piece to this puzzle: Although it's crucial to make potential customers feel confident in their chosen cloud provider, it is also just as important to make sure the customer-provider relationship remains mutually beneficial, with neither party ending up disappointed or broke. Everyone involved has to have reasonable expectations, or dissatisfaction on both ends is imminent.
The reason customers are initially attracted to the cloud is because of potential savings and other benefits, while the reason cloud providers sell the cloud is for profit -- and this needs to be recognized on both ends, according to Nolle of CIMI Corp.
For more background
Read this related story on cloud computing SLAs.
"Customers want to adopt the cloud because they can save enough money to make their business case, and the seller also wants to make enough money on the same deal to make their business case. If you think about two business cases that have to be met through savings, you realize this isn't something that happens easily," Nolle said.
Cloud providers can take preventative steps to lessen the blow of SLA payouts, including learning to say "no" to customers requesting an unrealistic SLA. If approached by a customer that does not have stable application architecture, but wants hosted services and an aggressive SLA, it can be beneficial to both parties for the provider to reject this request -- or to agree, as long as the customer meets certain conditions.
"[In this situation], we're going to tell the customer that we're just both going to be disappointed if we sign up for that because that's just not the reality of the situation," Drumgoole said. "If we don't believe that a certain SLA is achievable with the customer's application architecture, we may say we're only going to offer that if you are willing to make [certain] changes."
This was first published in April 2013